US SEC to share financial sector information to US Fed

To strengthen its oversight of the financial markets, the US Federal Reserve yesterday signed an information sharing pact over the financial services sector, specifically covering the banking sector, with the Securities Exchange Commission (SEC), in a move that consolidates the Fed's regulatory position in the country.

The agreement between the two regulators covers anti-money laundering, bank brokerage activities under the Gramm-Leach-Bliley Act, clearance and settlement in the banking and securities industries, and the regulation of transfer agents, which have traditionally been under the purview of the SEC.

A joint statement by the two regulators said, "The agreement specifically covers bank holding companies and so-called consolidated supervised entities that own securities firms and builds on and formalises the exisitng cooperative arrangements between the SEC and the Board, as well as the more recent cooperation on matters including banking and investment banking capital and liquidity following the Board's emergency opening of credit facilities to primary dealers."

"I am pleased with this agreement," said Federal Reserve Board chairman Ben Bernanke in the statement. "It formalises and strengthens the ongoing cooperation between our two agencies to enhance the stability of the financial system. I look forward to continuing this productive collaboration with Chairman Cox and his staff."

The US Fed traditionally has not regulated investment banks, which have been under regulation by the SEC, and the agreement will now alllow it information about financial services firms of common interest to the two regulators, including big Wall Street banks.

Ever since the emergency bailout package facilitated by the US Fed to rescue Bear Sterns in March and enabling emergency funds through its discount window to other US investment banks hit by the collapse of sub-prime market, which are under the primary supervision of the Securities and Exchange Commission, the Fed had been working on urgent regulatory changes.